Euphoria over bank
bailouts and the temporarily buoyant stock
markets is masking a sober reality.

The piper still has to be paid.

One fairly sanguine estimate of the cost of
salvaging Wall Street came Tuesday morning from
analysts at Merrill Lynch. They figure the
inflationary effect of all the bank bailout
measures now underway will push gold to $1,500
an ounce and oil back to $150 a barrel.

The analysts don't offer a timeline, but the way
markets have been jumping around lately it could
be any day now.

Perhaps the real question is: why stop at
$1,500?

All the world's governments have managed to do
so far is to stop the bleeding from the credit
crunch injuries that we actually know about.

There's still going to be a very nasty
recession. And it will happen simultaneously in
most of the developed world.

Fewer people will have jobs. The interest rate
on their adjustable mortgages will be shooting
up. There are bound to be more foreclosures, and
more toxic debts.

That doesn't even begin to look at what happens
as more credit card debt goes bad, or the truly
enormous derivatives markets.
For its part, Wall Street has completely lost
any credibility in arguing against increased
governmental spending. They are the first and
biggest pigs at the troughs each day, even if
they are being force fed.

And with a U.S. administration that's overseen
the biggest deficits in history about to be
replaced by the closest thing to a socialist
government America's ever had, "stimulus"
spending will likely remain high on Washington's
agenda.

Given all that, $1,500 for gold looks more like
a floor than a ceiling in the years to come.